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Maniraj, a paper vendor on Velachery Main Road, had a tough time last year when he had to vacate his house. Until then he was paying Rs. 1,200 for a 350 sq.ft dwelling unit near Velachery Lake. The landlord raised the rent to Rs.6,000 and Maniraj and his family of four could not afford it. After great difficulty, he found a 200-sq.ft tenement in one of the labyrinthine lanes. “I now pay Rs. 4,500 per month, which includes electricity charges. This is more than what I spend on food every month,” he lamented.

The condition of my colleague is better, but not much toz rejoice. Two years ago, after a long search, she bought an apartment 20 km away from the city. Anything closer was pricy. As a result, she spends three hours every day to commute between home and office.

With apartments inside the city priced between Rs.10, 000 to 15, 000 per sq. ft, and rentals spiraling, it looks only the gentry can live within the city. The middle class must scurry to the suburbs and the poor must slip into the crevices in between.

The mounting complaint is why does Chennai not produce affordable housing?

The government authorities shrug it off and say “it is a market phenomenon.” On the other hand, private players feel that they cannot solve social problems. “It cannot be defined,” the skeptics argue.

Shifting blame and leaving people in the lurch cannot continue. Providing affordable housing is an obligation of the state and it has to find ways to solve it.

Is affordability difficult to define?

After a careful study, the government of India has defined affordability as follows: for lower income group, apartment should not exceed four times the household gross annual income. For the middle-income group, the prices should not exceed five times the gross annual income.

Similarly, the rent should not exceed 30 per cent of the monthly salary for the lower income group. For the middle income, it should not exceed 40 per cent.

In other words, for a middle-income family, which earns Rs. 30,000 a month, any apartment costing more than Rs.18 lakh is unaffordable. At current market prices, this income can only fetch an apartment that is less than 450 sq. ft. The city does not offer many such small-sized apartments.

The condition of the poor is worse. To many who earn about Rs.10, 000 a month, apartments priced more than Rs. 5 lakh is unaffordable, and there is no housing project in the city that takes care of this group.

What is the solution?

Multiple strategies are required. Existing efforts such as reserving 10 per cent of the developed land for affordable housing have not delivered. Apart from reviewing them, new and innovative approaches are needed.

One model that is worth looking at is the concept of Community Land Trust (CLT). In CLTs, a not-for-profit organisation builds houses on subsidized land and gives them at a price much below the prevailing market rate. The condition is that when the buyer resells the apartment, the price has to be below the market rate prevailing then. This ensures that the subsidies are passed on to the subsequent buyers and the prices are kept at affordable levels for a longer period.

This model can be tweaked to suit local conditions. The State government instead of mindlessly monetising its land, can sell or allocate them to cooperatives at subsidised prices to build affordable housing on CLT model.

Successful adoption of this model in many cities across the world should convince skeptics. For example, in Cooper Square land trust project in Manhattan, the rentals are below 30 per cent of the tenant’s monthly income, while in the surrounding area people spend 50 per cent of their salary on rent.

Cities committed to the welfare of its citizens have done better in addressing the housing problem. Chennai has not done enough and it should.

A. Srivathsan is a Deputy Editor with The Hindu. He writes on urban development, architecture and conservation.

Any area witnessing price appreciation has one key growth driver pushing the rates in the region. Sholinganallur, a suburban residential hub of south east Chennai, has seen commercial development in the past. The already existing commercial segment catering to the strong workforce in the region is now driving housing demand in the vicinity.

In the last three months, the locality has witnessed approximately 12 per cent increase in average property values. It offers a mix of properties. However, multi-storey apartments are in maximum supply. The value of majority of apartment projects are between Rs 4,200 and Rs 5,000 per sq ft.

Previously the locality has seen development of large IT hubs and dedicated SEZs. As a result, strong residential demand has been witnessed from those looking to stay close to their workplace. Sholinganallur is now considered an IT hub having footprints of well-known IT companies such as TCS, Wipro, HCL, Infosys etc. With its well developed road infrastructure and its swift connectivity through ECR link road on the eastern side and Velachery Main Road on the western side, the area offers good social infrastructure to service its residents. The presence of schools, colleges, hospitals, super markets, restaurants and shopping malls adds value to the overall investment. On account of existing infrastructure realtors and developers expect property prices to witness an uptrend in the long-term.

On the rental side, a 1,000 sq ft, 2BHK apartment fetches Rs 22,000 to Rs 25,000 per month. This kind of yield has attracted investors to buy properties in Shollinganallur.

Maximum demand has been for 2 and 3 BHK configurations. Approximately 1 to 1.5 year back demand for 2 BHK apartments was relatively high in comparison to 3BHK. in the past one year, there has been an increase in demand for 3BHK units with sizes ranging from 1200 to 1800 sq ft. Some developers are also building small, 450 sq ft apartments mainly for the economically weaker section (EWS) category as mandated by the Chennai Metropolitan Development Authority (CMDA).

4 Seasons : Tallest apartment complex on ECR @ Rs. 1850/- p. sq.ft. only
– Four Seasons will have 4320 apartments which will be developed in various phases .

– Tallest apartment complex on ECR – Four Seasons will be of max .28 floors . We have launched 26 floors ( Summer block) in phase 1 .The other high rise buildings like Hiranandani Upscale ( 28 floors ) & TVH Oranya bay ( 29 floors ) are located on OMR and not on the East Coast Road .

– Launched on 11.11.11 – this date is considered very auspicious as it comes once in 100 years hence we did the Four Seasons project pooja on 11.11.11

– Only Four Seasons will have (Wooden Floor in Master Bedroom, Foyer, Shear Wall Structure, Podium Car Parking, Main door Carved Teak wood, three side lifts for each blocks, Garbage Chute, Power Backup, etc)

The Total land extent will be 18 acres where we will develop 720 apartments in 2 phases.

Phase 1 will have 320 apartments which will be completed and handed over by June 2012.

Phase 2 will have 400 apartments which will be completed for handed over by Dec 2012

The construction has already started & is progressing as per schedule.

The project offers you 2 BHK, 2BHK Plus & 3 BHK apartments ranging between 628 Sqft and 1232 Sqft and the cost will vary between Rs.10.36 lakhs to Rs.20.14* lakhs offered at a price of Rs.1650/ per sq ft.

In contrast to what was been witnessed in many of the more volatile cities over the last couple of years, Chennai�s residential property market saw steady growth in terms of pricing, demand and supply. Chennai�s residential property market is predominantly end user driven, and this fact did a lot to sustain consistent absorption throughout 2011. The absence of overt speculation has also ensured that developer has move pricing of homes in a stable and gradual manner. Unnatural spiking has therefore been successfully kept at bay.

We expect interest rates to decrease over the course of 2012, and this will result in greater demand for homes in Chennai in 2012.

Increased job security in the city has definitely helped the market to maintain buoyancy and a positive outlook. Over the last 12 months, it became increasingly evident that Chennai�s residential real estate market is significantly dependent on the IT/ITES sector. With employment stability in this sector looking a lot better now than it did in 2010, demand for homes has now reached a comfortable and dependable growth trajectory from which developers are taking their market cues.

CONFIGURATIONS IN DEMAND

The preferred size for 3BHK flats in Chennai has increased from 1200-1300 square feet during the recession to 1400-1500 square feet in the revival phase. The preference for 2BHK sizes has also increased from 850-950 square feet to about 1100-1200 square feet. Again, the main reason for this upgrade in preferences is increased budgets made possible by improvement in the performance of the IT / ITES sector. This is a welcome trend which is enabling architects, planners and developers to come up with better quality dwelling units. Affordable housing units continue to rule the roost in areas where social infrastructure lags and capital values are therefore lower.

We expect overall demand for residential properties in Chennai to increase once the interest rates stabilizes from their current peak. There is a very healthy demand in both the primary and secondary markets, since supply is scarce in both owing to the severe lack of land within the city. Land pricing has, in fact, surpassed the buying capacity of developers and this has put pressure on their ability to come up with viable residential products. Lack of supply and exorbitant pricing are causing both the end users and investor segments to take a closer look at suburbs with decent infrastructure.

Suburban Demand Drivers:

Positive market sentiments

Possible softening of interest rates

Increased job security

Unaffordable property rates in the central city

Year 2011 saw residential property pricing in Chennai moving up in a phased and rational manner, which helped in sustaining the momentum. Prices rose by between 8-30% in different areas, but these rises took place in small compartments and in proportion to the actual sales in particular locations and projects. We expect a similar trend to prevail in the year 2012.

Expected Price Movement For 2012:

OMR – 15-30%

GST – 10-15%

City � 20%

NH-4 – 5-8%

AREAS TO WATCH

Madhya Kailash � Sholinagnallur

This stretch is witnessing a clear supply-demand mismatch, with demand outstripping supply. With new employment being generated in this corridor and corresponding absorption of IT space, this area and its peripheries are witnessing extremely healthy demand for residential property. Its proximity to the city adds to the appeal of this area, which will see good appreciation over the coming years. Encouragingly (and in contrast to other parts of OMR) all completed projects here are fully occupied.

Velachery

Velachery is seeing consistent growth, because it is one of the few areas which are seeing holistic and self-sustaining development. With malls and other social infrastructure improving, Velachery is definitely next in line for good appreciation. In fact, near-lying areas such as Medavakkam, Pallikarnai, Pallavaram�Thoriapakkam, the 200 FT. MMRD Road and Rajakilpakkam are already experiencing the positive fallout effect of Velachery�s growth as a residential property destination. These areas are also witnessing good absorption and capital appreciation. There is also significant demand for homes in Porur along the NH4 corridor up to Urapakkam on the GST Road.

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MARG Swarnabhoomi would be impeccably sequenced in three phases for internal management.

Basic infrastructure such as power supply, road connectivity, sewage treatment facility and specialized infrastructure like water desalination plant and waste management system will also be developed. The entire facility is operated and maintained by New Chennai Township Pvt. Ltd., a subsidiary of MARG.

MASTER PLAN

MARG Swarnabhoomi has been planned by HOK, USA. Founded in 1955, HOK (Formerly Hellmuth, Obata and Kassabaum) is regarded as one of the finest design/architect firms and master planners in the World. With over 26 offices worldwide, HOK has designed the 1st LEED (Leadership in Energy and Environmental Design) certified airport terminal in Boston and has recently been ranked as No. 1 by Engineering News Record’s Top Green Design Firms Rankings.

MARG Swarnabhoomi would be impeccably sequenced in three phases for internal management.

MARG Swarnabhoomi is divided into processing and non processing zones. The processing zones include two Special Economic Zones (SEZs) viz. Engineering: 116 acres and Multi Services: 126 acres. The non processing zone will have up to 15,000 residential units, luxury villas and support infrastructure like schools, hospitals, malls etc.

Basic infrastructure such as power supply, road connectivity, sewage treatment facility and specialized infrastructure like water desalination plant and waste management system will also be developed. The entire facility is operated and maintained by New Chennai Township Pvt. Ltd., a subsidiary of MARG.

Residential rentals in Chennai and suburbs have shot through the roof in the last few years. We find out the reasons behind this trend.

When K Saravanan moved into the city from Hyderabad five years ago, he found himself a 2 BHK apartment on OMR for a rent of Rs8000 a month. Besides being close to his place of work, his apartment also offered amenities like gym, jogging track, and so on. Today, he pays a rent of Rs 15,000 for the same apartment. “It’s still much less than what I would be shelling out if I were to live in the heart of the city, say Alwarpet or Nungambakkam. My apartment complex now has a club house, a small in-house cinema hall, a supermarket, ample green cover, etc, and it’s not too far away from the centre of the city either,” he says.

Many like Saravanan prefer living in rented properties close to their work places, but not many can afford the increasing rents in some of these locations. N Hariharan, Office Director, Chennai, Cushman & Wakefield, says, “There has been an increased migration of people to the southern part of the city; the demand has been growing but the supply is limited, especially in areas like Alwarpet, Besant Nagar, to name a few. There is a good supply on GST and beyond Perungudi on OMR. These areas have seen the maximum increase in rentals.” He points out that while rentals in Velachery used to be about Rs8,000 (for a 2 BHK) a few years ago, today it is about Rs25,000. Average rentals in Besant Nagar and Thiruvanmiyur, he adds, are above the Rs25,000 limit.

Apart from the fact that rents are high, the other concern with regard to residential rentals is that they are not uniform. Two apartments in the same complex, for instance, that are of the same size, age and on the same floor demand different rentals. “It depends entirely on the owner. The rental market is largely unregulated and unorganised,” adds Hariharan. This particularly affects tenants, especially when they are looking for apartments on rent within the city. Take the case of Arun (name changed) who lives in a rented property in Adyar. He has been staying in the 2BHK apartment for the last ten years and the rent has increased manifold over the years. “When I moved in to the apartment, in early 2002, I was paying a rent of Rs9,000 and now I pay about Rs30,000. Of courses, the rentals are bound to rise, but this astronomical increase is not justifiable, especially when the apartment itself is about 20 years old and there has been no significant improvement in terms of infrastructure (within the complex) and no amenities provided. There needs to be a strict guideline to ensure that rentals in a particular area at least are uniform,” he says.

Arun’s views are shared by many who live in rented properties across the city. The landlords, however, defend their stand and attribute the increase in rentals to increasing value of land. Ramya Ravindran (name changed) who has let out two apartments – one in Thiruvanmiyur and the other in Mylapore – believes that she has no choice but to increase rentals. “As per the Rental Agreement we hand out to our tenants, we are allowed to increase the rent by 10% per year. Although we do not do it every year, for fear of losing good tenants, we have to increase our rents whenever we modify the apartment. With the market value of land in these areas having increased significantly, we are bound to increase rentals too,” she reasons.

Another factor that has given rise to the phenomenon of increase in rental rates is that of rising income levels of individuals. Abhishek Gopal, a working professional who hails from Chennai, has a property in Velachery he has leased on rent for the last couple of years. “The development of the suburbs and the rising income levels of the middle class have led to an increase in the rental rates of most localities in the city. “People are willing to spend more as long as the locality is safe and has a range of amenities. I hike the rent by 10% every two years but it varies based on many factors such as land prices, electricity rates, etc,” he says.

Rajesh Babu, Founder of RECS Group, a city-based real estate consultancy, says the availability of services and infrastructure in the city attributes to the constant rise in rental rates in the city. “Suburban areas such as OMR, GST Road, and Oragadam have witnessed a rise in rental rates over the years owing to the booming IT and manufacturing industries in the area,” he says. He also mentions that individuals who have lived in the city for more than two years look for renting out their properties. “A large chunk of properties on rent are owned by individuals who are looking for investment avenues and have an understanding of the real estate market,” he adds.

With soaring property prices, it is natural that rentals have to be hiked. It will, however help if the increase were not so haphazard, say residents who feel that a guideline to regulate rentals in the city and suburbs will ensure that there is order amidst the chaos.

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